When Performance Measures Backfire: Campbell’s Law and the Implications for ESG Metrics

Abstract

According to Campbell’s Law, when a quantitative measure is used as a performance target, that measure becomes susceptible to corruption pressure. When this happens, the metric distorts the process it was intended to measure. This paper applies Campbell’s Law as a lens for examining these dynamics in the context of ESG (environmental, social, governance) metrics. The vulnerabilities of ESG metrics are identified, discussed and linked with specific risks. The result is a proposed, preliminary taxonomy which is relevant to a range of stakeholders. Theory and practice understanding of ESG are extended through the proposed taxonomy and its accompanying, suggested mitigation strategies.